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Shares and options given to Brisbane staff need one value for the employee's tax and another for the company's accounts, and a priced round leaves the ordinary shares worth less than the investors paid. We set out each figure, and the gap between them, while the terms can still change.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
When a Brisbane company grants equity to staff, Division 83A needs a market value for the employee's tax and AASB 2 needs a grant-date fair value for the company's accounts. Around a capital raise, the same work splits the round price between share classes, sets the ordinary share value and documents the ESIC evidence.
Staff equity in Brisbane turns up well beyond the start-up scene. A software company in Fortitude Valley or Newstead grants options to keep its engineers from moving interstate. An engineering or mining services firm in Milton rewards senior project managers through a loan-funded share plan. A medical technology spin-out near the Herston health precinct issues shares to the researchers whose work it was built on. In every case two tests start on the day the equity changes hands: Division 83A of the Income Tax Assessment Act 1997 measures the employee's discount against market value, and AASB 2 requires the company to expense the fair value of the award as at the grant date. Those are different questions asked on different bases, and they seldom produce the same figure.
Using one number for both creates two separate problems. If the market value is too low, the ATO can amend the employee's assessment and examine whether the company's ESS reporting was accurate. If the fair value is wrong, every profit and loss statement across the vesting period carries the error, and it tends to surface at the first audit or in the due diligence an incoming investor commissions.
A priced round brings all of this to a head. Once a Newstead scale-up closes its Series A, every later grant is measured against the round price, yet the new investors hold preference shares with rights the staff's ordinary shares lack. Pegging the option exercise price to the preference price either overcharges staff for their options or puts at risk the start-up concession the plan relies on, and the mistake stays hidden until an auditor or the ATO asks to see the calculation.
We prepare both values as separate conclusions with the reasoning shown, for founders and boards from the CBD and South Bank out to the established family companies of Acacia Ridge, Eagle Farm and the Australia TradeCoast. If the numbers will not support the position the company hopes to take, we tell you before any grant letter is signed.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Division 83A decides when an employee pays tax on equity and on how much. AASB 2 decides what the company records as an expense and over which periods. A single calculation cannot answer both, and an attempt to make it do so usually leaves at least one of them wrong.
The amount assessed is the market value of the share or right less anything the employee paid for it. Tax falls in the year of acquisition unless the scheme qualifies for deferral, in which case the taxing point moves to when any real risk of forfeiture and any genuine disposal restriction end, and no later than fifteen years after the grant. Whichever date applies, the company needs a market value it can support for that day.
An equity-settled award is measured once, at grant, and that amount is recognised over the vesting period whatever the share price does next. A cash-settled award, such as a phantom share plan, is remeasured at every reporting date until it is settled. Service conditions and non-market performance conditions work through the number of awards expected to vest, and the expense reverses if they are not met. A market condition, a total shareholder return hurdle for example, is built into the grant-date value, so the expense remains even if the hurdle is never reached.
Subdivision 83A-33 lets an unlisted Australian resident company, incorporated for less than ten years and with aggregated turnover of no more than $50 million, give staff equity without an upfront tax bill. The condition is a pair of limits measured on the grant date: a share discount of no more than 15 per cent of market value, and an option exercise price at or above the market value of the underlying share. Meeting either limit depends on a value that existed at grant, not one assembled afterwards.
Each employee's ESS statement is due by 14 July and the ESS annual report must reach the ATO by 14 August, and both rely on market values. Queensland payroll tax raises a separate question: under the Payroll Tax Act 1971 (Qld), administered by the Queensland Revenue Office, shares and options granted to employees are generally treated as wages, valued on the grant date or the vesting date depending on the employer's election. A plan with staged vesting can therefore need a third valuation date for a single award.
A qualifying start-up may use the ATO's safe harbour methods: a net tangible assets calculation for shares, and for options a published table based on share value, exercise price and remaining term. That certainty has real worth. The resulting number, though, can be far from what the equity would fetch, and where the safe harbour is not available or gives an obviously unrealistic answer, market value falls back to general principles: the price a willing and informed buyer and seller would agree at arm's length, with neither compelled to deal.
We start by valuing the unlisted company as a whole, through the income and market approaches, or from the last arm's length round if it is recent and nothing material has changed since. That value is then shared out across the classes on the register. A liquidation waterfall pays out each preference in turn and fits a company close to an exit. The option pricing method treats each class as a call option over the business, with the preference amounts as strike prices, and a backsolve tunes that model until it reproduces the price the latest investors paid. For a Fortitude Valley software company a few months past its Series A, the backsolve is usually the strongest route to an ordinary share value.
Options and performance rights are then priced with a model that fits their terms. Black-Scholes handles a plain option with a fixed exercise price. A binomial lattice handles early exercise and vesting in tranches. Monte Carlo simulation is required once a market hurdle or another path-dependent feature appears. With no trading history to draw on, volatility is the input an auditor examines first, so we derive it from a documented set of listed peers matched on industry, size and gearing, measured over a period consistent with the award's expected life. A loan-funded share plan, of the kind some Brisbane engineering and mining services firms use for senior staff, is in substance an option because the employee's loan is limited in recourse, and we value it that way whatever the plan calls it.
Around a raise, the same analysis answers what founders actually want to know. What is the headline pre-money valuation worth once the option pool is carved out before the new money arrives, convertible notes and SAFEs convert at their cap or discount, and the preference stack sits ahead of the ordinary shares? What is a single ordinary share worth on the day of the next grant? For the early stage innovation company offset, the company must meet the early stage test and either the 100-point innovation test or the principles-based test when the shares are issued. Your tax adviser decides whether it qualifies; we prepare the market sizing, scalability and competitive advantage evidence the principles-based limbs depend on, dated and kept on file. If a bank is part of the funding, a lender-facing valuation covers enterprise value for sizing the facility, the assets offered as security and the headroom against proposed covenants.
None of these shows up when the grant is made. They surface when an auditor, the next investor's advisers or the ATO asks for the calculation, by which point the terms cannot be changed.
Almost every share scheme or raise valuation ends up in front of a reader outside the company: the auditor checking the AASB 2 expense, the ATO reviewing the ESS annual report or a start-up concession claim, or the advisers to the next round's investors. That is why a certified report is the normal choice. An Indicative valuation is most useful earlier, while the plan is still being drafted and the terms remain open.
The report links every conclusion to its framework, the valuation date that framework requires, the standard of value and the information relied on. It sets out the whole-of-company valuation, how value is allocated across the classes, which model was used for each award and why, every input with its source, and how far the result moves when the key inputs move, usually volatility and expected term. Where the Division 83A and AASB 2 figures differ, the report explains the gap, so your tax adviser and your auditor are reading the same document.
A certified valuer signs every report, answers the auditor's questions directly, defends the peer group and the model choice, and stands behind the conclusion if the ATO or a later investor challenges it. If a disagreement over value reaches the Supreme Court of Queensland, for example between founders or between the company and a departing executive, the same valuer can give expert evidence under the Uniform Civil Procedure Rules 1999 (Qld). We work alongside your tax adviser, the lawyers drafting the plan rules and your auditor from the start, because a valuation prepared without them usually has to be redone.
If the auditor challenges the volatility input and the ATO challenges the exercise price, does one working paper answer both? If it does not yet, hold the grant.
Talk your situation through with a certified valuer before you commit to anything, at no cost.